SENATE ADVANCING MEASURE TO TAX INTERNET PURCHASES

Bill would allow states to require online sites to collect taxes

WASHINGTON 
The Senate moved closer Thursday to passing a bill to tax purchases made over the Internet. But a final vote in the Senate was delayed until senators return from a weeklong vacation.

Although opponents hope senators will hear from angry constituents over the next week, they have a steep hill to climb to defeat the bill in the Senate.

The Senate voted 63-30 Thursday to end debate on the bill, setting up a final Senate vote to pass the measure on May 6. The final vote will require a majority to pass the bill, so 14 supporters would have to flip to stop it. President Barack Obama supports the bill, but it faces an uncertain fate in the House, where some Republicans consider it a tax increase.

The bill would empower states to require online retailers to collect state and local sales taxes for purchases made over the Internet. Under the bill, the sales taxes would be sent to the states where a shopper lives.

Under current law, states can only require stores to collect sales taxes if the store has a physical presence in the state. As a result, many online sales are essentially tax-free, giving Internet retailers an advantage over brick-and-mortar stores.

Retailers who have lobbied in favor of the bill celebrated Thursday’s vote.

“The special treatment of big online businesses at the expense of retailers on Main Street will soon be a thing of the past,” said Bill Hughes of the Retail Industry Leaders Association.

A handful of senators from states without sales taxes opposed the bill, with Sen. Ron Wyden, D-Ore., leading the fight against it. Oregon, Montana, New Hampshire and Delaware have no sales taxes, although the two senators from Delaware support the bill.

“It’s coercive. It requires a number of states to collect the taxes of other states thousands of miles away against their will,” Wyden said in an interview.

Wyden said the bill also gives an advantage to foreign retailers.

Supporters say the bill treats foreign retailers the same as domestic ones, but opponents question the ability of states to enforce state tax laws on companies based in other countries.

Supporters say the bill is about fairness for local businesses that already collect sales taxes, and lost revenue for states. Opponents say the bill would impose complicated regulations on retailers and doesn’t have enough protections for small businesses. Businesses with less than $1 million a year in online sales would be exempt.

Many of the nation’s governors — Republicans and Democrats — have been lobbying the federal government for years for the authority to collect sales taxes from online sales.

Last year, Internet sales in the U.S. totaled $226 billion, up nearly 16 percent from the previous year, according to Commerce Department estimates.

The National Conference of State Legislatures estimates that states lost $23 billion last year because they couldn’t collect taxes on out-of-state sales.